How does a prepaid cellphone business work?

With computers you purchase the products at the wholesale price, then you add your profit and sell it at the retail price.

With cellphones its different. With cellphone contracts the customer gets the cellphone for free, but you the reseller earn a percentage of his monthly cellphone bill.

We did offer cellphone contracts to our resellers in the past but found that its not worth the effort. It takes a lot of admin and paper work to submit an application and then most of the time the application gets declined because of non-credit worthiness of the client.

So we decided to focus on prepaid. It works the same as contracts. The reseller cant really make a profit on the actual cellphone, but he earns a monthly income on his clients monthly usage.

We get monthly reports from Vodacom, MTN and CellC on how much airtime was loaded on the prepaid simcards that we sold (i.e. the usage). We then get a percentage of the usage from the networks. This commission we get, we give straight to our resellers.

So the business model on prepaid is to sell starterpacks. Once a starterpack that you sold is activated, then you start earning commission every time airtime is loaded onto that simcard. So you need to be creative to get your client to start using the simcard that you sold him. You can sell the handset at cost to your client, but find ways to get your client to use his new simcard.

Example: some stores have a policy of not honoring the warranty if another simcard was used in the cellphone other than the one sold with it.

Another example is to sell 3G modems. With 3G modems the customer is not concerned with the cellphone number of the simcard and will easily use the simcard that you have activated for him 

Resellers earn the following commission on the monthly airtime loaded on the starterpacks they sold

• MTN - 2% per month on recharges
• CellC - 3% per month on recharges
• Vodacom - 5% per month on recharges

You will notice that Vodacom offers the most commission, so try and encourage your clients to take Vodacom starterpacks. However some clients prefer MTN or CellC, then give them the option to go for those networks.

The cost of the starterpacks to resellers are R5 each.

Resellers are welcome to add for example a profit and sell it at R10.

Or sell it at the cost price of R5

Or even give it away for free if you are confident that the client will activate and use the simcard

If you have any question please contact our Cellphone department manager: Charmaine Jordaan - This e-mail address is being protected from spam bots, you need JavaScript enabled to view it - 087 802 5607